9 Common Myths about Blockchain You Should Not Believe
Many have heard about the blockchain, as interest to this technology continues to grow, and its active implementation in many areas is yet to come. It is already being used in many industries, from money transfer to various countries of the world to with the organization of musical concerts. And the potential for its applications are really great.
Like any other new technology, blockchain is surrounded by many myths, and if you are going to enter this market, you have to learn to separate fact from fiction.
In this article, we decided to collect a list of the most common mistaken beliefs about the blockchain and explain why such statements are far from the truth.
1. Blockchain – it’s all about money
The reason for this mistaken belief is the fact that this technology was first involved in the creation of the digital cryptocurrency Bitcoin. Yet, the potential of the technology’s application goes far beyond the world of finance.
Only the way data is arranged is important, and the sphere where it can be applied when using blockchain makes almost no difference. That’s why this technology is used for a variety of services nowadays – from concert organization to e-voting.
2. Blockchain and bitcoin are the same
The roots of this myth, again, lie in the fact that people associate the terms of blockchain and bitcoin and consider them interchangeable. In fact, this is not true. The popularity of the cryptocurrency has led to this misconception.
“The blockchain for bitcoin is the same as the Internet for e-mail,” explains Financial Times columnist Sally Davis. “This is a large electronic system in which you can create apps. Currency is one of these apps.”
3. Blockchain is absolutely secure
No system or database can be 100% protected, no matter how well the data is encrypted and what technologies are used to ensure security. Yes, thanks to the distributed network, the level of data protection in the network is very high. But still, it’s not 100%.
There exists a term called “Attack 51%“, which assumes that the power generating an attack is greater than the power of the rest of the network. The term is introduced by analogy with a controlling stake. Thus, an attacker with a sufficient amount of resources can gain control over the chain of blocks and change the data recorded in the blockchain, as well as facilitate the appearance of counterfeit blocks in the blockchain.
4. This is a tool for large organizations
There are no obstacles to the use of blockchain technology by small companies, legal entities, and even individuals. One of the important advantages of the technology is its ability to scale based on user needs.
A possible reason for this myth is that projects related to the blockchain are worked on mainly by large companies at the moment, and information about these projects often appears in the news. So, this is what makes this impression.
5. Blockchain is a magic database in the cloud
Blockchain is not designed to store any files or documents, as some people mistakenly believe, considering it to be a kind of cloud storage or physical disk. The blockchain network only has information about the existence of a particular document, but doesn’t store it within itself.
6. It is used only by bad guys
Decentralization and anonymity are quite tempting opportunities for criminals. From time to time there theories appear in the media, according to which virtual coins are used in the trade in weapons, drugs and even to finance terrorism. But there is no reliable or confirmed information of this kind.
Undoubtedly, cryptocurrencies can be used by criminals for their own benefit and to receive illegal profits. But, at the same time, many officials and businessmen have nothing to stop them from using legal instruments for money laundering and to evade taxes, and the risk of potential punishment doesn’t stop them from doing it either.
7. Smart contracts are analogous to legal documents
Currently, smart-contracts in the blockchain are just code snippets that automatically trigger the execution of a certain action subject to all the necessary conditions. For example, if a customer makes a payment, he is automatically given access to certain information.
The main advantage of “smart” auto-executable contracts is that they speed up operations and allow you to operate without any intermediaries. They do not impose any legal obligations and are just an automation instrument, not a paper contract analogue.
Companies should remember that the code is not law, and without separate contractual agreements, smart contracts are not legally obligatory.
8. It will cause a technical revolution
Romantics and fanatics claim that in the near future the blockchain will change the economy and society, radically transforming how we work and live. Experts say that this is too optimistic. For some areas, this scenario is likely to come true, but in many other cases the implementation of this technology will be limited.
It is likely that the blockchain can have a significant impact on the finance, banking and public services by increasing their effectiveness. But for everything else, it’s just a myth like the other items on our list.
9. Many states want to ban blockchain
In fact, this is true in relation to cryptocurrencies, but not the technology itself. Many states treat cryptocurrencies with caution for a variety of reasons. Not everyone is ready to recognize them as a means of payment, so in Vietnam, Ecuador, India and Thailand, bitcoin and similar virtual currencies are banned.
Part of this comes from the fact that governments are trying to reduce the risks of financial manipulation and possible money laundering. But if we talk about the importance of the blockchain, the prospects of its application are not denied by anyone.
The number of companies using this technology to develop their business is constantly growing. And the development of software solutions based on the blockchain can help in creating important competitive advantages in different economy sectors.
Still, in order to understand if it is possible to introduce it into a specific business model, it is necessary to primarily understand what the technology is capable of, and to separate reality from myths. We hope that our article will help you avoid the common misconceptions and help you make the right decisions.